INVESTORS LONG THE WRONG GOLD, FED’S WALLER THROWS COLD WATER ON THE STOCK MARKET RALLY

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By Nigam Arora & Dr. Natasha Arora

To gain an edge, this is what you need to know today.

The Wrong Gold

Please click here for a chart of S&P 500 ETF (SPY) which represents the benchmark stock market index S&P 500 (SPX).

Note the following:

  • The chart compares SPY with bitcoin, gold ETF GLD, India ETF EPI, and Hong Kong ETF FXI.  Often, it is helpful to visualize the comparison between different assets.
  • The chart shows that many investors are long the wrong gold – over the last two years money has been flowing out of gold and into bitcoin and other cryptos. Many investors have been calling crypto digital gold.  Many cryptos are now worthless.  Bitcoin is the most stable crypto.
  • The chart shows that real physical gold has gained 7.23% vs. 16.92% loss for digital gold.
  • The chart shows that gold has also outperformed S&P 500 by about 4% this month.
  • Indian stocks are hitting an all time high.  Many investors are now claiming that India is a safe haven and are rushing into India.
  • The chart shows that amid high negativity about China, stocks in Hong Kong are up 16.53% for the month.
  • Over the weekend, Fed governor Christopher Waller threw cold water over the stock market rally.  Waller made the following points:
    • The Fed slowing the pace of rate increases should not be seen as the Fed “softening” to lower inflation.
    • Investors should pay attention to the “end point” and not to the pace of rate increases.
  • More Fed speak is ahead.
  • The meeting between Biden and Xi is generating some optimism in the stock market, helping it recover from Waller’s comments.
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Momo Crowd And Smart Money In Stocks

The momo crowd is 🔒 (To see the locked content, please take a 30 day free trial) stocks in the early trade.  Smart money is 🔒 in the early trade.

Gold

The momo crowd is 🔒 gold in the early trade.  Smart money is 🔒 in the early trade.

For longer-term, please see gold and silver ratings.

Oil

The momo crowd is 🔒 oil in the early trade.  Smart money is 🔒 in the early trade.

For longer-term, please see oil ratings.

Bitcoin

Bitcoin is staging a rally after Binance said that it is working to create a crypto industry recovery fund.

Markets

Our very, very short-term early stock market indicator is 🔒.  This indicator, with a great track record, is popular among long term investors to stay in tune with the market and among short term traders to independently undertake quick trades.

Interest rates are ticking up, and bonds ticking down.

The dollar is stronger.

Trading futures is not recommended for most investors. The purpose of providing this information is to give an indication of the premarket activity that usually guides the activity when the market opens.

Gold futures are at $1766, silver futures are at $21.70, and oil futures are at $88.13.

S&P 500 futures resistance levels are 4000, 4200, and 4318: support levels are 3950, 3860, and 3770.

DJIA futures are down 58 points.

Protection Band And What To Do Now

It is important for investors to look ahead and not in the rearview mirror.

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Consider continuing to hold existing positions. Based on individual risk preference, consider holding 🔒 in cash or treasury bills or allocated to short-term tactical trades; and short to medium-term hedges of 🔒, and short term hedges of 🔒. This is a good way to protect yourself and participate in the upside at the same time.

You can determine your protection band by adding cash to hedges.  The high band of the protection is appropriate for those who are older or conservative. The low band of the protection is appropriate for those who are younger or aggressive.  If you do not hedge, the total cash level should be more than stated above but significantly less than cash plus hedges.

It is worth reminding that you cannot take advantage of new upcoming opportunities if you are not holding enough cash.  When adjusting hedge levels, consider adjusting partial stop quantities for stock positions (non ETF); consider using wider stops on remaining quantities and also allowing more room for high beta stocks.  High beta stocks are the ones that move more than the market.

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Nigam Arora

Nigam Arora

Nigam Arora is known for his accurate stock market calls. Nigam is a distinguished master of the macro. He is a popular columnist with over 100 million page views, an engineer, and nuclear physicist by background. Nigam has founded two Inc. 500 fastest growing companies and has been involved in over 50 entrepreneurial ventures. He is the developer of Theory ZYX of Successful Change Management and is the author of the book on Theory ZYX, as well as the developer of the ZYX Change Method for Investing.

Dr. Natasha Arora

Dr. Natasha Arora

Dr. Natasha Arora has significant expertise in investment analysis especially biotech, healthcare, and technology. Natasha is a graduate of Harvard Medical School followed by a postdoc at MIT. She has published several peer reviewed research papers in top science journals.

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